EU and UK flags

EU employment law made before 1 January 2021 was converted into domestic UK law, and will be known as Retained EU Law

Michael Connolly

6 min read

Portsmouth Law School Faculty of Business and Law Law

The UK and EU has published the Trade and Cooperation Agreement (TCA), a summary (UK Government) and an explanatory brochure (EU Commission). In general, in exchange for tariff free access to the single market, the parties have agreed to maintain a ‘level playing field’.

For employment, this means that UK employers should not be able to lower employment rights and costs. This prevents them from gaining an unfair competitive advantage over EU businesses. This is achieved for Northern Ireland in a quite straightforward way, as it continues to be bound by EU law as before. The matter is more nuanced for the rest of the UK (‘Britain’).

By a ‘non-regression’ clause, Britain agreed not to reduce employment rights below the standards existing on 31 December 2020, but only if this affects trade or investment. Britain may diverge from EU employment laws but the EU may apply ‘rebalancing measures’ if it obtains proof of a material impact on trade or investment. This requires more than just conjecture or a theoretical possibility.

Commitment not to reduce employment rights

This ‘non-regression’ clause (TCA, Pt 2, Title X1, art 6.2) is not subject to the Agreement’s main dispute resolution mechanism. Instead, a panel of experts will decide whether either party has fallen short of this commitment. This means the European Court of Justice (ECJ) no longer has a direct role in Britain’s employment law. Nonetheless, the EU can still challenge legally any weakening of Britain’s employment rights, providing it has a material impact on trade or investment, material proof which would be required. This is a higher bar than what would have been the case before 2021, where the EU would only have to show an inconsistency between its law and UK law, typically this is where the UK has failed to implement fully an EU Directive. (See e.g. Case C-61/81 Commission v UK, on a failure to provide for equal value pay claims; Case C-165/82 Commission v UK, on the SDA 1975 not covering non-binding collective agreements, nor employers with fewer than six employees). If an EU challenge succeeds, it may introduce ‘rebalancing measures’, which include tariffs.

Existing ‘Retained’ EU Law

EU employment law made before 1 January 2021 was converted into domestic UK law, and will be known as Retained EU Law. It will continue in force as before. (EU (Withdrawal) Act 2018, s 7) Some subtleties lie in what the tribunals and courts might do, which are considered below.

  1. If a tribunal or court finds that existing domestic legislation falls short of this Retained EU Law, it may well find it has to read words into the legislation to conform with a pre-existing ECJ decision. This has not been unusual, see e.g. Falkirk Council v Whyte [1997] IRLR 560 (EAT); Rowstock v Jessemey [2014] 1 WLR 3615 (CA) [45(5)]. Prior to Brexit, courts felt compelled to follow EU law and afforded themselves ‘broad and far-reaching’ discretion to read words into, or out of, non-compliant domestic legislation: Vodafone 2 v Revenue and Customs Commissioners [2010] Ch 77 (CA) [38]. This could have the effect of EU and UK law converging, rather than diverging. Examples could include the objective justification defence in the Equality Act 2010 (ss 19 & 69) which (arguably) falls short of the strict Bilka necessity test,1 and for equal pay liability where there is a ‘single source of pay’.2
  1. The Supreme Court and Court of Appeal can choose not to follow pre-2021 ECJ decisions if it ‘seems right to do so’.3 It is likely that only a dramatic decision would be enough to diverge from EU law to such a degree that it affects materially trade or investment, and so invoking rebalancing measures.
  1. ‘Any question as to the validity, meaning or effect of any retained EU law is to be decided …(a) in accordance with any retained case law and any retained general principles of EU law…’. (EU (Withdrawal) Act 2018, s 6(3)). The general principles of EU law are retained, although not the Charter of Fundamental Rights (EU (Withdrawal) Act 2018, ss 6(7), 5(4) respectively). 

New ECJ Decisions

The starting point is that courts, and employment tribunals (ET), are no longer bound to follow new ECJ decisions (issued in 2021 and beyond) but may have regard to them (as well as ‘another EU entity or the EU’) where relevant (EU (Withdrawal) Act, ss 6(1) and (2)). The phrase ‘where relevant’ replaced the proposed phrase ‘where appropriate to do so’, which was criticised by the then President of the Supreme Court, Lord Neuberger, for lacking clarity. The new phrase does not appear any more concrete. After all, a tribunal is hardly likely to consider irrelevant decisions, while the whole matter remains optional (‘may have’).

Nevertheless, the ‘may have regard’ facility could cause disputes in any employment tribunal case on a topic where the ECJ hands down a new and potentially relevant judgment. One side might argue that it should be taken into account to maintain conformity, with the other side arguing that the tribunal is not obliged to do this. This argument could become bogged down in economic matters of the material effect on trade and investment and the risk of a decision triggering rebalancing measures. However, there are two reasons why this may not occur. First, arguments are likely to be speculative, when the trigger for divergence requires material evidence of the effect. Second, this is a policy matter that the tribunal (or court) may consider beyond its jurisdiction, and better addressed by Parliament.

New EU Employment Directives

Britain is free to ignore any new EU Directives, but, once again, if a failure to implement a Directive results in a significant divergence that materially impacts trade and investment, the EU may instigate rebalancing measures. There are three new EU employment Directives due to be implemented over the next two years. The UK is largely compliant with these. They concern Whistleblowing (Directive 2019/1937/EU, due for implementation by 17 December 2021 (art 26)), Transparent and Predictable Working Conditions (Directive 2019/1152/EU, 1 August 2022 (art 21)), and Work-Life Balance for Parents and Carers (Directive 2019/1158/EU, 2 August 2022 (art 20)). The EU Commission has proposed a Minimum Wage Directive (COM/2020/682 final), which would seek to align processes and implementation of a minimum wage, but not the amount paid. Again, the UK is largely in compliance already. 

Employment rights that could be repealed without breaching the TCA 

Some employment rights exist irrespective of EU membership, and so the UK is free to repeal them. Indeed, many were repealed in 2013 by the Coalition Government in an attempt to reduce business ‘red tape’ (see e.g. Enterprise and Regulatory Reform Act 2013). Significant rights surviving that reduction are Unfair Dismissal4 and the TUPE rights that extend to Service Provision Changes (enabling employees’ rights to be transferred when services are contracted out).5 Providing the EU does not legislate in these areas, there is nothing in the TCA to prevent the repeal of these rights.

Dr Michael Connolly is a Reader in Law at Portsmouth Law School. The author would like to thank Panos Kapotas and James Hand for their valuable comments in earlier drafts of this post.

Endnotes

1 Case 170/84 Bilka-Kaufhaus v Weber von Hartz [1984] ECR 1607. See JA Lane, R Ingleby, ‘Indirect discrimination, justification and proportionality: are UK claimants at a disadvantage?’ (2018) 47(4) ILJ 531; and M Connolly, ‘Objective Justification, Less Discriminatory Alternatives, and the “Great Repeal Bill”’ (2017) 17 (3) IJDL 195.

2 In some ways, article 157 TFEU (‘single source of pay’) exceeds EA 2010, s 79(9) (allowing equal pay comparisons with ‘associated employers’. See Case C-43/75 Defrenne v Sabena (No.2), [1976] ICR 547, [40] and South Ayrshire Council v Morton [2002] ICR 956 (CSIH).

3 EU (Withdrawal) Act 2018, s 6(5). This is the Supreme Court's rule for overruling its own decisions: Practice Statement (Judicial Precedent) [1966] 1 WLR 1234 (HL); This practice transferred to the Supreme Court by Constitutional Reform Act 2005, s. 40. See Austin v Southwark London Borough Council [2011] 1 AC 355 (SC) [25]. The Court of Appeal was added by the European Union European (Withdrawal) Act 2018 (Relevant Court) (Retained EU Case Law) Regulations 2020 SI 2020/1525, reg 3, and can depart from EU law on the same basis (ibid reg 5). There is a similar provision for Scotland's High Court of Justiciary (EU (Withdrawal) Act 2018, s 6(5)).

4 Although the qualification period to acquire Unfair Dismissal rights was extended from 1 year to 2 years in 2012: 2012 SI 2012/989.

5 The Coalition Government proposed abolishing this, but recanted following consultation. Business was in favour of its retention because of the certainty it gave. See, BIS, ‘Government Response top Consultation’ (Sept 2013), p . 8.